Thursday, January 10, 2013

Who's Got the Power

For those of you expecting a rant about which party controls government here, you're about to be disappointed.  Instead this is about the results of all of the power that you've been saving the last couple of years and what it means to you in the years ahead.  Energy-saving appliances, high-efficiency air conditioners, furnaces, and hot-water heaters, and of course those lovely (and toxic) energy efficient light bulbs that we've all planted, and which are now starting to bear fruit.  It's a bitter fruit however.

The graph above shows information released by the US Energy Information Administration that  in spite of continued population growth we are either using less energy (as in transportation and industrial) or at worst minimally increasing demand (residential and commercial) for the amount of energy that we are consuming as a nation.  What is the result of all this sacrifice and belt-tightening in the way of expensive new appliances and even more expensive light bulbs ... energy now costs more.

Now I suppose it's understandable to have to pay more for electricity when those producing it are having difficulty keeping up with the demand out there.  These are basic market influences that have been in place since civilization began.  With demand waning however, one would in fact suspect that supply and demand would see costs going down.  

Oh sure, the EPA regs are making it increasingly difficult to use coal, and coal is cheap as a consequence of its abundant supply and decreasing demand.  Natural gas, its bituminous counterpart; is not only far less polluting, but available in supplies that are currently project to last for hundreds of years and as cheap as it's been in the last 15 years.  Oil too, seems to have been discovered in far greater supplies than was previously known in this nation, and its price has been relatively stable over the last couple of years.  

As detailed today in the Kansas City Star however, rates for electricity in the Kansas City area look to be going up by about 10%, with state regulators granting Kansas City Power and Light $64 million of a requested $106 million in rate increases.  For those of you who haven't been keeping track (which is of course what they're counting on), this means that electric rates have gone up some 42.7 % since 2000.  In spite of that, Regulators called the result of this decision a success since they reduced the stockholders requested 'return on equity' (profit) from 10.4% to 9.7%. So let's get this straight, Kansas City Power and Light was granted a 10% profit margin by government mandate; and for selling less of their product than they have in the past, regardless of the what's involved in producing its product in the first place.

You know, there's nothing like knowing that the government's got your back and what therefore your profit margin is going to be as a business before you actually do business.  It's nice to have a warm, fuzzy government agency grant you a higher profit margin by fiat than most businesses make after a year's hard work.  And with the exception of farmers, who still unaccountably get paid by government for not growing crops on land that they own, it's nice to get paid more for producing less.

Why should anyone else care about these tragic numbers .... because it's happening all over the country.  All of the more efficient power plants, infrastructure improvements, and declining usage have left us with nothing in the way of lower costs.  In fact, electricity remains one of those bastions of constant rate increases.  If usage is us, rates are required to go up in or to serve customers.  If usage is down, rates are required to go up in order to make up for the lack of revenue generated by customers (pun intended).  Of course, there's probably more that I could say on the subject; but running computers takes electricity after all.  So while can still afford both my groceries and my electric bill, I will simply as the question:

The Power Companies or the Local Regulators, who really has the power?

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